informationliberation
The news you're not supposed to know...




An Introduction to Austrian Economics: Understand Economics, Understand Everything
The Century of the Self: The Untold History of Controlling the Masses Through the Manipulation of Unconscious Desires
The Disappearing Male: From Virility to Sterility

The Obama Deception: The Mask Comes Off
Operation Gladio: The Hidden History of U.S. Sponsored False Flag Terrorism in EuropeThe New American Century: The Untold History of The Project for the New American Century
(more)
Article posted Oct 10 2012, 4:44 AM Category: Economy Source: Peter Schiff Print

Riding Into the Sunset or a Brick Wall?

by Peter Schiff

A month ago, I presented the case for why Fed Chairman Bernanke would have strong motivation to launch another round of quantitative easing (QE) before the election. In short, it would save him his job. Now, I didn't predict with certainty that he would do so only the few men at the FOMC knew that for sure but it seemed likely. Shortly thereafter, Bernanke not only announced more stimulus, but promised to keep it flowing to the tune of an additional $40 billion a month until conditions improve. As I had written, this is essentially the election platform of the Obama-Bernanke ticket: we will keep the party going indefinitely.

Unfortunately, though these are two powerful men, they are not above the law of economics. While critics have dubbed this program "QEternity" or "QE-Infinity", it will end much before that. We are witnessing a massive bubble in US government debt, and we've reached the point where no one in charge believes it will ever end an excellent contra-indicator.

Rather than going on for eternity, this third round of QE is only hastening the day when there is a flight of confidence from the dollar and US Treasuries. This will cause a sharp rise in market interest rates and surging consumer prices across America. If you think $4 a gallon gas is bad, wait till you see it going up by 25 or more per week.

At this point, the Fed Chairman will have a choice to make: keep printing, which will push the dollar into uncontrollable hyperinflation, or begin tightening, which will bankrupt the US government and banking system.

I have long written about this Sophie's choice confronting the Fed, but so far the printing option has been too easy. With the world only slowly abandoning the dollar as the reserve currency and the euro crisis offering a distraction, the Fed has been able to more than double the money supply without US consumers seeing out-of-control price hikes at the store. Not that there hasn't been inflation look at housing, gas, or the stock market but it hasn't reached crisis proportions. When prices start rising fast enough for the average person to figure out he's being screwed, then there will be riots in the streets.

The good news for precious metals investors is that either scenario is bullish for gold and silver.

If the Fed pushes this insanity to the point of hyperinflation, precious metals will quickly be seen as a form of money that can purchase the same amount of goods week-after-week, month-after-month.

If there is tightening, prices might stabilize, but the federal government and its banking cartel will likely go bankrupt in tandem. That means no bailout money will be forthcoming, no FDIC insurance can be paid, and banks may go on holiday for lack of reserves. This is what happened in Iceland in 2008, when its big banks had debts 10X the size of the country's GDP. There was no way for the government to offer a bailout, so the whole edifice came crashing down. While the 320 thousand citizens of Iceland didn't make a big dent in the currency markets during this transition, you better bet the 320 million citizens of the United States will.

As we've seen in cases like Argentina's in the '90s and Hungary's in the '40s, when the banking system freezes, hard assets trade at a premium. Gold and silver coins may be at a disadvantage in terms of convenience in an era of credit cards and Paypal, but what happens when those funds are no longer available? Already, regulations and lower profit margins have driven banks to add fees to debit card transactions. Not to mention that every digital transaction is traceable by the tax authorities.

If everyone starts to carry rolls of cash everywhere, it's not a big leap to carry coins. A silver coin the size of a dime is currently worth about $3.50. Two could buy you lunch.

While I believe a tightening and national default would put the US on the road to recovery, the transition period will be messy. Bread lines, rampant foreclosures, and a spike in crime are likely results. In this situation, gold and silver may be the only things people can count on. In fact, they are likely to not only hold their value, but dramatically appreciate as millions of people flood the metals market and the dollar economy deleverages. In plain English: maybe it will only take one of those dime-sized silver coins to buy lunch. Maybe that coin will buy lunch for you and a friend.

Bernanke and his Wall Street supporters see cheap money until the horizon but that horizon is really a painted brick wall. So it's not QE-Infinity, it's QE until the Fed either recognizes the brick wall and slams on the brakes, or doesn't and crashes into it. Either way, the only way to get off this locomotive is to invest in hard assets.
_
Peter Schiff is president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse. His latest book is The Real Crash: America's Coming Bankruptcy, How to Save Yourself and Your Country.





Latest Economy
- Cost of Renouncing US Citizenship Goes From Free In 2010 to 450$, And Now It's Been Jacked to $2,350
- Colorado's Illegal Pot Market Thrives
- Neighborhood Bully - America Recklessly Throws its Weight Around
- Doug Casey on the Phil Donahue Show (1980/1981)
- Yellen: Where No Man Has Gone Before
- Block on CNBC: Privatize the Roads
- Burgeoning Regulations Threaten Our Humanity
- How Government Forces the Poor Into Black Markets









No Comments Posted Add Comment


Add Comment
Name
Comment

* No HTML


Verification *
Please Enter the Verification Code Seen Below
 


PLEASE NOTE
Please see our About Page, our Disclaimer, and our Comments Policy.


FAIR USE NOTICE
This site contains copyrighted material the use of which in some cases has not been specifically authorized by the copyright owner. Such material is made available for the purposes of news reporting, education, research, comment, and criticism, which constitutes a 'fair use' of such copyrighted material in accordance with Title 17 U.S.C. Section 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. It is our policy to respond to notices of alleged infringement that comply with the DMCA and other applicable intellectual property laws. It is our policy to remove material from public view that we believe in good faith to be copyrighted material that has been illegally copied and distributed by any of our members or users.

About Us - Disclaimer - Privacy Policy



Advanced Search
Username:

Password:

Remember Me
Forgot Password?
Register

"You Have The Right To Shut Up": Police Raid Tavern, Lock Doors, Forcibly Search Dozens of Patrons - 09/17Government Seeks To Steal Elderly Car Crash Victim's Home Over Single Missed Property Tax Payment - 09/17Perpetual Fear Under Empire - 09/17FBI Investigates: Teen In A Coma After Cop Deploys Taser During Routine Traffic Stop - 09/17CBC Warns Canadians: US Cops Will Pull You Over And Steal Your Money - 09/17LA School District Police Get Armored Vehicle, Grenade Launchers - 09/17Anal Probes Run Amok: Drug-Sniffing Dogs Must Be Stopped - 09/1717-Yr-Old In Critical Condition After Window Malfunction Leads to Tasering During Traffic Stop - 09/16

Rialto, CA Police Made to Wear Cameras, Use of Force Drops by Over Two-ThirdsCop Who Karate Chopped NY Judge In Throat Gets Off Scot-FreeFlorida Cop Smashes Compliant Woman's Face Into Car -- "Maybe Now You Can Understand Simple Instructions"VIDEO: Lapel Cam Reveals A Day In The Life Of A U.S. Police Officer (Tasing, Beating, Breaking & Entering, Stomping On Heads... and Laughing About It)Caught On Tape: Officer Sucker Punches Inmate In Face, Files Report Claiming 'Self Defense'Insult Person On Twitter, Go To JailSWAT Team Brings TV Crew To Film Raid Against Threatening Internet Critic -- Raids Innocent Grandma InsteadCop Karate Chops NY Judge In The Throat
(more)

 
Top